Crude Palm Oil Weekly Report – August 6, 2016

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TA03757Malaysian palm oil futures retrace back from a seven-week high on Friday at 2,406 on stronger ringgit and bearish perspective on coming industry regulator report.

Crude palm oil futures (FCPO) benchmark October 2016 contract settled at 2,406 on Friday, up 89 points or 3.8 per cent from 2,317 last Friday.

Trading volume decreased to 161,172 contracts from 162,515 contracts from last Monday to Thursday.

Open interest based decreased to 876,532 contracts from 894,784 contracts from last Monday to Thursday.

Intertek Testing Services (ITS) reported that exports of Malaysia’s palm oil products during July rose 12.7 per cent to 1,273,543 tonnes compared with 1.13 million tonnes during June.

Societe Generale de Surveillance’s (SGS) report showed that Malaysia’s palm oil exports during July rose 15.4 per cent to 1.283 million tonnes compared with 1.111 million tonnes during June.

Overall, demand strengthened from Europe Union and China while demand weakened slightly from India.

Spot ringgit strengthened to 4.02 as an unexpected rise in June exports and overnight rebounds in oil prices.

Reuters survey showed that Malaysian palm oil inventories at the end of July likely rose 3.1 per cent from a month earlier to a four-month high of 1.83 million tonnes while output likely gained 3.8 per cent to 1.59 million tonnes and forecast exports surged 13.9 per cent.

On Monday, the price rose to highest levels in more than a month as market underpinned by an improving export while weakness in soybean oil seen capped the gains.

On Tuesday, the price reversed early losses and rose as tracking competing vegetable oil gains and support by weaker ringgit.

On Wednesday, the price rose to a six-week high on Wednesday, tracking better performing competing vegetable oil market, weaker ringgit and stronger short term demand.

On Thursday, the price rose, recording a fifth consecutive session of gains as bullish competing vegetable oil market boost market sentiment.

On Friday, the price retrace back from a seven-week high on stronger ringgit and bearish perspective on the coming industry regulator report.

 

Technical analysis

According to the weekly FCPO chart, the price opened and stayed above the lower Bollinger band for the third consecutive week while MACD histograms continued to show a decreasing sign. By the end of the week, the price continued to approach the middle Bollinger band which could signal that the continuation of the current downtrend correction.  On Monday, the price rose as market continue stand above the middle Bollinger band for the second consecutive day which could provide a continuation of thedowntrend correction signal for current market.

On Tuesday, the price rose as all Bollinger band moved sideways simultaneously. MACD line continued moving upward which might indicate a continuation of price correction for current downtrend in the short term.

On Wednesday, the price attempt to test the upper Bollinger band and psychological level at 2,400 which could provide a significant resistance for current market. A daily bullish ‘marubozu’ candlestick pattern could provide short term bullish signal for current market.

On Thursday, the price rose and closed above the upper Bollinger band which indicate that current market stayed at overbought condition and could potentially be limited upper Bollinger band.

MACD line continued to approach the zero line which may indicate that continuation of price correction for current downtrend while a zero line crossover may provide short term bullish signal.

On Friday, the price fell and closed below the upper Bollinger band which indicate that the market stayed away from an overbought condition. MACD line crossed over the zero line which could provide a short term bullish signal for the current market.

In the coming week, the price has the potential to range between 2,330 and 2,475.  Resistance lines will be placed at 2,475 and 2,500, support lines will be positioned at 2,330 and 2,290, these levels will be observed in the coming week.

 

Major fundamental news this coming week

MPOB, ITS and SGS report released on August 10 (Wednesday).

 

Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my. Disclaimer: This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.